Analysis: Market expectations overly focused on crude oil, March US PPI significantly below expectations

ME News message, April 14 (UTC+8): Investinglive analyst Adam Button said that in the U.S., both the overall and core PPI for March came in far below market expectations on both a year-over-year and month-over-month basis. Given that market forecasts were mainly focused on the expected surge in energy prices, the key question is where the deviation came from. Although energy prices did rise sharply, the move was smaller than expected: refined oil jumped (gasoline +15.7%, diesel +42.0%, etc.), but natural gas plunged 51.7%, partially offsetting the overall impact. Services unexpectedly held flat (0.0% month-over-month). With a weighting of about 68%, this was the main reason the data came in below expectations. One of the drivers was a decline in trade profit margins—retailers absorbed part of the energy costs rather than passing them through. Transportation prices rose by 1.3%, but with a weight of only 5%, it was not enough to make up the gap. Food prices fell 0.3% as well, further dragging down the overall figure. In short, the market’s over-focus on crude oil led it to underestimate three factors: the sharp drop in natural gas, compressed trade profit margins, and slowing core services inflation. The energy transmission effect is real, but the magnitude is narrower, while pricing power in other parts of the economy has weakened. (Jin10) (Source: ODAILY)